Both Arizona and California tax residents on income earned everywhere so the sale of foreign property will be taxable to an AZ or CA resident.
You do not have a choice where to pay tax. If you were an AZ resident at the time of sale, the sale is taxable to AZ and vice versa.
AZ allows a subtraction 25% (.25) of any net long-term capital gain included in your federal adjusted gross income that is derived from an investment in an asset acquired after December 31, 2011.
AZ also allows a credit for tax paid to another state or country so you can claim a credit for tax paid to South Korea on the sale of your property.
Arizona residents are allowed a credit against Arizona income taxes for net income taxes imposed by and paid to another state or country if the following apply:
- The income taxed in Arizona is derived from sources within another state or country. This income is subject to a net income tax in the other state or country regardless of your residence.
- The other state or country does not allow Arizona residents a credit for taxes imposed on income subject to tax in both Arizona and the other state or country.
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